By U.S. stocks were trading lower Monday after a strong two-week run as short-term bond yields continued to rise and investors digested developments in the Russia-Ukraine war.
What’s happening
The Dow Jones Industrial Average
DJIA,
-0.63%
fell 292points, or 0.8%, to 34,562.
The S&P 500
SPX,
-0.32%
lost 21 points, or 0.5%, to trade at 4,520.
The Nasdaq Composite
COMP,
-0.15%
was down 38 points, or 0.3%, at 14,132.
The Dow, S&P 500 and Nasdaq Composite each registered gains last week, with the S&P 500 now up 8% over the past two weeks, the best stretch of that duration since the period ending Nov. 13, 2020.
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What’s driving markets
The market remains focused on developments surrounding Russia’s invasion of Ukraine. President Volodymyr Zelensky said Ukraine could declare neutrality and offer security guarantees to Russia as he sought a direct meeting with Russian President Vladimir Putin. Talks between the two sides are due to resume in full in Turkey on Tuesday.
Read: Zelensky pushes peace ‘without delay,’ and wants to talk to Putin face-to-face
Moscow late last week signaled it was shifting its war aims to focus on the eastern half of the country, though Russian forces continued to rain missiles on Ukrainian cities, news reports said. Western officials saw few signs that Russia was willing to seek a peaceful resolution, The Wall Street Journal reported.
Traders also were looking at news from the global No. 2 economy China, which locked down its financial capital, Shanghai, in response to rising COVID-19 cases. That left oil prices
CL00,
-5.29%
7% lower on related demand worries.
Bond trading remained volatile, with the yield on the 10-year Treasury
TMUBMUSD10Y,
2.467%
temporarily moving further above 2.50% before pulling back. Yields move in the opposite direction to prices. The global bond market is heading for its worst returns since the Marshall Plan was implemented after the second world war.
Moreover, the yield curve continues to flatten, a potential signal that investors fear an economic slowdown. The 5-year Treasury yield briefly traded above the rate on the 30-year Treasury bond, temporarily inverting that measure of the curve. The 2-year yield remains below the 10-year yield. An inversion of that measure of the curve, with the 2-year rate rising above the 10-year, is seen as a reliable recession indicator.
“Plainly, the main trend in the equity markets is ‘up,’ and last week’s trade by the S&P 500 above its 200-day moving average should signal a resumption of the short-term uptrend,” said Jeffrey Saut of Saut Strategy, in a Monday note, observing that the SPDR S&P 500 Trust
SPY,
-0.32%,
and iShares Transportation Average ETF
IYT,
+0.11%,
are above their respective 10, 20, 50, and 200-day moving averages for the first time in a long time.
“The quid pro quo is that a close below 4,130 should change the short-term trend of the [S&P 500] to down, but I think the odds of that happening are remote. The SPX has currently bested its short-term retracement zone of 4,447 – 4,530 and has support between 4,393 – 4,336. But last week it broke above the top of that zone,” he said.
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A close above 4,587.77 would see the S&P 500 exit a market correction, according to Dow Jones Market Data. A correction is defined as a fall of more than 10%, but less than 20%, form a recent peak. The large-cap benchmark entered a correction on Feb. 22 when it closed more than 10% below its record finish from Jan. 3. An asset exits when it rises 10% from its correction low.
According to an analysis from MSCI, value and smaller-size stocks have done better during changes of at least 200 basis points in the federal-funds rate since 1975, while growth stocks have struggled.
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Companies in focus
Tesla Inc. shares TSLA rose 7.6% after the electric vehicle giant disclosed plans to enable a stock split, which would be the second in two years.
Shares of Apple Inc.
AAPL,
-0.59%
edged down 0.3% after a Nikkei Asia report said the company plans to make about 20% fewer iPhone SEs next quarter.
Other assets
The ICE U.S. Dollar Index
DXY,
+0.31%,
a measure of the currency against a basket of six major rivals, rose 0.5%.
Bitcoin
BTCUSD,
+3.08%
jumped 1.9% to trade above $47,700, hitting a 2022 high.
The Stoxx Europe 600
SXXP,
+0.14%
rose 0.3%, while London’s FTSE 100
UKX,
-0.14%
was little changed.
The Shanghai Composite
SHCOMP,
+0.07%
ended 0.1% higher, while the Hang Seng Index
HSI,
+1.31%
jumped 1.3% in Hong Kong and Japan’s Nikkei 225
NIK,
-0.73%
fell 0.7%.
